Pricing and the Pain of Paying

Paying hurts. Every bill, large or small, pains us as we part with it. This is why we, as product developers, need to understand the psychology of pricing.

If we understand the circumstances under which paying is most painful, it’s possible for us to devise a payment system that reduces that pain. When you’re analyzing the pain your payment strategy causes, ask yourself four questions:

1. How often am I making my customers pay? (Frequency)• Try to reduce frequency, or try to get users on an auto-pay system. Think of a gym membership - what if you had to pay each time you went to the gym?

2. Are my customers paying in physical dollars? (Concreteness) • When we swipe a credit or debit card, the monetary loss feels much less real. Gift cards function in a similar way in terms of reducing the pain of paying.

• When we pay for something in “points” or “credits,” as many gambling sites and games have you do, the financial cost becomes even less real. Just look at how the gaming company Zynga invented their own currency Farmbucks.

3. When are my customers paying? (Timing)• This is related to frequency. Are you trying to get your customer to pay for a product or service before they understand or experience its benefits? Think about the right time to trigger the payment.

4. Is my main product free? (Free)• Making a product free takes away the pain of paying.

ExercisePick one area in which you can reduce the pain of paying for your product. Define the specific action you’ll take.